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Mortgage rates are falling sharply, as investors head to the relative safe haven of the bond market. Mortgage rates follow loosely the yield on the 10-year U.S. Treasury. The average rate on the popular 30-year fixed has fallen 21 basis points in the past week, from 4.94 percent to 4.73 percent, according to Mortgage News Daily.

Americans may be losing money in their stock portfolios this week, but they are gaining purchasing power in the housing market. Mortgage rates are falling sharply, as investors head to the relative safe-haven of the bond market. Mortgage rates follow loosely the yield on the 10-year U.S. Treasury.

The average rate on the popular 30-year fixed has fallen 21 basis points in the past week, from 4.94 percent to 4.73 percent today, according to Mortgage News Daily. This rate is for borrowers with good credit and strong down payments. The drop comes after the 30-year fixed hit a recent 8-year high of 5.05 percent at the start of November.

"Lenders are going to vary a bit, both in general, and specifically with respect to recent volatility," said Matthew Graham, chief operating officer at Mortgage News Daily. "The important measurement is the change from the recent highs. In that regard, most lenders are roughly 3/8ths of a percentage point lower in rate than they were a month ago, which comes out to a savings of roughly $70 per month on a $300,000 loan."

Rising rates have caused a significant slowdown in sales of both new and existing homes. This week the CEO of Toll Brothers, a luxury homebuilder, blamed higher rates for a double-digit drop in new orders for Toll homes in the most recent quarter.

Homebuilder sentiment dropped to a two-year low in November on higher rates, and housing sentiment among consumers is also falling. A majority of consumers surveyed in October by Fannie Mae said they did not expect mortgage rates to decrease in the next year.

While December is the slowest month for the housing market, home price gains have been easing, and competition is lower. The very recent drop in rates suddenly has some buyers who were on the fence, jumping back in.

"We have not seen an increase in refinances, but we have seen a jump in buyers applying for new mortgages," said Todd Probasco, vice president mortgage sales manager at Lakeside Bank in Chicago. "These folks may have been people who were not sure if they were ready to buy, but now they are."